Oil producers said cuts in output were driving up prices by reducing supplies.
Photograph: Dmitry Lovetsky/AP

Oil prices jumped to their highest for more than two years on Monday after major producers said output cuts were squeezing supplies.

Brent crude leapt by 2.7% to $58.39 (£43.35) a barrel as analysts said prices could rise to levels not seen since 2014, in a move that would put further upward pressure on inflation in the UK. The oil price squeeze has been orchestrated by the Opec oil producers’ group but could be exacerbated if Turkey follows through on threats to block supplies from Kurdistan.

Improving global growth, especially in emerging economies and the eurozone, is also pushing up oil prices by increasing demand for energy, while the damage to US shale output in the wake of Tropical Storm Harvey could also lift Brent.

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“It’s all driven by the idea is that the production cut is starting to work and the rebalance is under way,” said Gene McGillian at US-based consultancy Tradition Energy.

But Britain’s economy is expected to suffer more generally should prices continue to rise towards $60 a barrel. The balance of payments deficit, already the largest in the G7, is expected to widen after years of declining North Sea production turned the UK into a net importer of oil.

The higher price of oil is also expected to translate into higher prices at petrol pumps, which could push inflation above 3%.

Oil prices tumbled from above $115 a barrel in the summer of 2014 in response to flagging growth in China and much of the world’s developing economies. In January 2016 Brent crude dipped below $30 a barrel. But the situation has improved for producers following a recovery in China and stronger growth across most developed nations in growth.

Last week an Opec meeting said that an agreement to cap production was another important factor helping to reduce the global supply glut.

Meanwhile Turkey threatened to cut oil flows from Iraq’s Kurdistan region in response to its referendum on independence, which Turkey does not recognise. The Iraqi government does not recognise the referendum and has called on foreign countries to stop importing Kurdish crude oil.

Opec, which counts Iran, Iraq, Kuwait, Saudi Arabia and Venezuela among its 14 members, agreed with Russia and several other producers last year to cut production by about 1.8m barrels a day from the start of 2017. On Friday it said the reduction had helped to lift oil prices by about 15% in the past three months.